Fed's George says she sees no case for interest rate cut

MINNEAPOLIS (Reuters) - The U.S. Federal Reserve does not need to cut interest rates as part of its strategy to keep inflation close to its 2 percent target, a Fed policymaker said on Tuesday.

Several U.S. central bankers have expressed concern over persistently below-target rates of inflation and argued that interest rate cuts may be necessary.

But Kansas City Federal Reserve Bank President Esther George, a voting member this year on the Fed's rate-setting committee, described the undershoot as minor, especially given low levels of unemployment in the United States.

"I don't see an argument right now for a rate cut," George told a gathering of the Economic Club of Minnesota.

She said she saw little "little reason to be concerned" about current low rates of inflation.

U.S. inflation has cooled over the last year and is currently below the Fed's 2 percent target.

After several years of slow interest rate hikes, the Fed has kept borrowing costs steady this year, in part because of cooled consumer prices.

George said she supports the Fed's current "wait-and-see" approach because of the lack of upward inflationary pressures.

"The current outlook for inflation appears to be benign," she said.

George argued against calibrating monetary policy to try to overshoot the Fed's inflation target in order to make up for past undershooting.

Rather, she said she sees a case for allowing inflation to deviate persistently from the central bank's target as long as it stays a half percentage point above or below it.

(Reporting by Jason Lange; editing by Diane Craft)

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